Consequences of options backdating Online dirty chat online

29-Nov-2016 06:08

In some cases, the date of exercise, rather than the date of grant, was changed to an earlier date to convert ordinary income into capital gains.In general, companies engaging in a classic backdating transaction chose a date when the stock price was at a low point and chose that favorable date as the grant date.(For more insight, see ) Although it may appear shady, public companies can typically issue and price stock option grants as they see fit, but this will all depend on the terms and conditions of their stock option granting program.However, when granting options, the details of the grant must be disclosed, meaning that a company must clearly inform the investment community of the date that the option was granted and the exercise price. In addition, the company must also properly account for the expense of the options grant in their financials.Basically, a stock option is a contract right to purchase an amount of stock at a set price for a period of time.

We're talking top executives at big-name companies like Apple, Altera, Broadcom, Brocade, Cirrus Logic, Comverse, KLA-Tencor, Maxim, Mc Afee, Rambus, Sanmina-SCI, Take Two, Trident, Verisign, and Vitesse. That's serious fallout considering that options backdating is legit as long as the company reports it and accounts for it accurately.

If the company sets the prices of the options grant well below the market price, they will instantaneously generate an expense, which counts against income.

The backdating concern occurs when the company does not disclose the facts behind the dating of the option.

You see, if you backdate stock options to a date when the price of the stock was lower, then the options are "in-the-money" when granted.

That means the company incurs an expense equal to the difference in the share price between the two dates.

We're talking top executives at big-name companies like Apple, Altera, Broadcom, Brocade, Cirrus Logic, Comverse, KLA-Tencor, Maxim, Mc Afee, Rambus, Sanmina-SCI, Take Two, Trident, Verisign, and Vitesse. That's serious fallout considering that options backdating is legit as long as the company reports it and accounts for it accurately.If the company sets the prices of the options grant well below the market price, they will instantaneously generate an expense, which counts against income.The backdating concern occurs when the company does not disclose the facts behind the dating of the option.You see, if you backdate stock options to a date when the price of the stock was lower, then the options are "in-the-money" when granted.That means the company incurs an expense equal to the difference in the share price between the two dates.In 1972, a new revision (APB 25) in accounting rules resulted in the ability of any company to avoid having to report executive incomes as an expense to their shareholders if the income resulted from an issuance of “at the money” stock options.